Ardwell Irion
PHILIPSBURG--On Wednesday, Finance Minister Ardwell Irion said that a follow-up meeting will be held with Moody’s Investors Service regarding the downgrade of the St. Maarten government’s issuer ratings from Baa3 to Ba2. Moody’s also changed the outlook to negative.
Irion said on Wednesday that the request for Moody’s to do a rating for the country began in 2018 or 2019 by a previous government. “So, it is not that Moody’s came on their own and decided to do a rating. It was a request from a previous government, according to what was stated by them and it had to do, at the time, with looking at airport financing and so forth and even in conversation with them they basically said that since St. Maarten does not borrow money on the outside market – the international market – in essence, the rating is not as significant as for a country that does borrow on the outside market because we borrow in the kingdom.
“What was a bit confusing for them was understanding the relationship with Holland and the discussions that we were having last year in regard to the bond loan and in particular, at the time, they were concerned that if we did not get an agreement that we would not be able to repay the loan from the Netherlands. That was the main thing…they did not get a clear answer as to what will happen if we come to an agreement…and once we can show that we have an agreement in place, and since then we already have an agreement for the loan from last year, that is already a big difference. Once we can show either an alternative financing or that we have an agreement with the Netherlands on financing and so forth, the rating should be fine and improved.”
The key drivers behind the downgrade by Moody’s were policy differences with the Netherlands (the sole source of financing for St. Maarten) and untested access to alternative sources of financing.
“The negative outlook reflects the risk that political differences with the Netherlands may lead to a repeat of the funding problems St. Maarten faced at the end of last year. The local currency ceiling is lowered to Baa2 from A3 and the foreign currency ceiling is lowered to Baa3 from Baa1.
“The three-notch gap between the local currency ceiling and the sovereign rating reflects the limited role of the government in the economy. The one notch difference between the foreign and local current ceilings reflects the limited scope to impose transfer and convertibility controls within St. Maarten’s existing monetary union,” said Moody’s.
